Earned part-time income of over $600? You may receive a 1099-K 

Posted on November 21, 2022

The IRS reminds taxpayers earning income from selling goods and/or providing services that they may receive Form 1099-K, Payment Card and Third-Party Network Transactions. That’s the appropriate form for payment card transactions and third-party payment network transactions of more than $600 for the year.

As always, income, including from part-time work, side jobs or the sale of goods is taxable. Taxpayers must report all income on their tax return unless it is excluded by law, whether they receive a Form 1099-NEC, Nonemployee Compensation, Form 1099-K, or any other information return.

However, money received through third-party payment applications from friends and relatives as personal gifts or reimbursements for personal expenses is not taxable.

What’s new about this?

The American Rescue Plan Act of 2021 (ARPA) lowered the reporting threshold for third-party networks that process payments for those doing business.

Prior to 2022, Form 1099-K was issued for third party payment network transactions only if the total number of transactions exceeded 200 for the year and the aggregate amount of these transactions exceeded $20,000.

Beginning in 2021, even a single transaction exceeding $600 can trigger a 1099-K.

The lower information reporting threshold and the summary of income on Form 1099-K enables taxpayers to more easily track the amounts received.

Generally, greater income reporting accuracy by taxpayers also lowers the need and likelihood of later examination.

If you think this may apply to you, consider making an estimated tax payment

Income taxes must generally be paid as taxpayers earn or receive income throughout the year, either through withholding or estimated tax payments.

If you are in business for yourself, the CPAs at Teipen CPA Group suggest that making estimated quarterly tax payments is a good idea. Estimated tax payments are used to pay not only income tax, but other taxes as well, such as self-employment tax and alternative minimum tax.

Need more help understanding what income applies to you? The IRS has answers online:

Go to IRS.gov Chapter 5, Business Income, of Publication 334, Tax Guide for Small Business; Publication 525, Taxable and Nontaxable Income and on IRS.gov at Understanding Your Form 1099-K.